dsmWealth December 6, 2018

"Land stretching out so far and wide..." Farm ownership may be a lucrative investment as well as a popular fantasy.

With Farmland Investment, You Can Star in 'Green Acres'
BY STEVE DINNEN

Iowa is teeming with farmland. And every year, by dint of the retirement or death of a property owner, much of it is for sale. So is it now your time to turn a plow?

According to data compiled by the National Council of Real Estate Investment Fiduciaries, the total return (cash income plus price appreciation) from farmland in 2017 was 6.2 percent. That’s below returns for investor real estate and the S&P 500. But on a 10-year timeframe, farmland is the top earner.

Randall Hertz, at Hertz Farm Management Inc. in Nevada, says most farmland buyers are themselves farmers, or people who grew up on a farm. But he often gets queries from people who are interested in diversifying their portfolios, which explains why he is working on a deal near Madrid for a client based in New York, or with an East Coast bond trader.

To judge the value of their investment, these and any investor have much due diligence to perform. First off is learning a property’s CSR – or corn suitability rating. This is a numerical ranking that indicates how good the land is for, obviously, corn. The higher the CSR, the better the land. (There also is a Productivity Index that some farms use when corn is not the go-to income generator).

Commodity prices obviously play a role, though Hertz said that land values tend to lag some of the ups and downs of commodities. Regardless, you’ll likely surprise yourself with the price tag.

"It always appears to be expensive," Hertz says of farmland.

Among the many factors to examine, you’ll want to now how flat the ground is, how well it drains and whether it is tiled to drain excess water. Maybe there are some soft factors that will help you make up your mind. Are there trees on the land for hunting or a pond for fishing? What about distance from Des Moines, so you can drive out a take a look now and then. If you won’t personally farm it, you’ll need a farm management company such as Hertz to tend to those duties.

This isn’t a cheap undertaking, Hertz says. While prices "run all over the place," he suggests a minimum entry of $400,000 to make it worth your while.

For a look at some spreads currently available, refer to rlifarmandranch.com. Bear in mind that Iowa farmland is extremely productive, and pricing reflects that.

A Timely Reason To Take a Fresh Look at Roth IRA Option
BY STEVE DINNEN

Much year-end tax planning is going on, so here’s another item to consider: Rolling a traditional IRA into a Roth IRA to trim or even eliminate future taxes.

The idea here is to let the money grow tax free in a Roth instead of taxable with a traditional IRA. Also, there are no required minimum distributions like there are on traditional IRAs.

Kevin Wingert, at American Retirement Systems in Urbandale, works with nationally known financial planner Ed Slott and provides this example. A couple has taxable income of $100,000. The first $19,500 in taxed at 10 percent, the next $58,350 is taxed at 12 percent and the remaining $22,600 is at 22 percent. They have another $65,000 of taxable income before hitting the 24 percent tax bracket. So, use some of the remaining 22 percent tax bracket to get funds into the tax-free Roth, as you have to pay taxes on funds rolled out of a traditional IRA.

If a child inherits a big lump sum from a traditional IRA all in one year, they could very well end up in a much higher tax bracket since it’s all taxed as ordinary income in the year they take it. Funds inherited from a Roth IRA are tax free.

On Philanthropy: Best Excerpts From First 100 Columns
BY BRUCE DeBOSKEY for WealthManagement.com

Since 2010, I’ve written 100 columns addressing many aspects of philanthropy for families, businesses and foundations. To acknowledge this milestone, here are some of my favorite excerpts that best encapsulate the many lessons I’ve learned and the thoughts I’ve tried to convey.

On Family Giving
Many families fail to talk about their values around money and philanthropy while they still can. Advisors frequently meet families who wait until a grandparent, parent or child dies to start the conversation about giving. But by then, a meaningful participant is lost. The time to begin a family discussion about philanthropy is today when values can be developed and shared, priorities and goals established and the philanthropic journey begun and enjoyed together.. > FULL ARTICLE